Max Re, a Bermuda reinsurer, said earnings grew 93 percent in the first quarter, as the company benefited from higher investment income, particularly on alternative investments.

The company, which had delayed its earnings report in order to finish an internal investigation into the accounting of so-called finite reinsurance contracts sold between 2001 and 2003, said on Wednesday night it had made $72.9 million, or $1.15 a share, compared to net income of $37.7 million, or 75 cents a share, in the same period a year ago.

Max Re?s income from operations, which excludes net realised gains or losses, was $74.5 million, or $1.17 a share, compared to $37.3 million, or 75 cents a share during the first three months of 2005.

Investors seemed pleased with the result early yesterday, pushing up the company?s shares 11 cents, or 0.4 percent, to $24.11 in mid-day trading. But the stock closed down 15 cents at $23.85 by the close., The shares jumped nine percent a day earlier, as Max Re put an internal investigation behind it.

Investment firm Keefe Bruyette upgraded its recommendation on Max Re?s stock, based on an expectation the reinsurer stock will outperform the market. The KBW Insurance Index?s daily gain was 0.6 percent, while month-to-date, the index was down 3.41 percent. The index is used as a measure of how insurance stocks are performing overall.

Chief executive Robert Cooney said the first quarter results ?reflect solid underwriting performance coupled with strong investment returns?. Max Re reported a combined ratio of 90.9 percent, which roughly indicates the company made about nine cents for every dollar in underwriting business during the period. In the year-ago period, the company posted a moderately better combined ratio of 87.6 percent.

Business volume, on a gross basis, was nearly 44 percent lower as the company walked away from any significant participation in the life and annuity market. In the first quarter a year ago, Max Re sold life and annuity policies totalling $143.2 million. Gross sales this year were 99.4 percent lower at $800,000.

A conservative underwriting approach also persisted in Max Re?s property and casualty departments, where gross policy sales fell by 22.5 percent. Reinsurers sometimes reduce the amount of business they do because of concerns the pricing on policies is not robust enough to provide a profit greater than potential losses.

And after the heavy losses in the third and fourth quarters last year from record hurricane activity, many reinsurers are making sure their books of business are diversified enough to protect them from being overly exposed to losses in future.

?Our property and casualty line premium volume declined in line with our expectations,? said Mr. Cooney, in the earnings statement. ?We continue our efforts to diversify our business through such smaller participations and increased the number of transactions bound this year.?

Max Re, throughout its seven-year history, has earned a reputation for being a bit of a chameleon.

Its original business model targeted high investment returns, and then in 2002 it shifted its focus to sales of more traditional insurance and reinsurance products. Now its underwriting model appears to be coming in for a bit more fine tuning.

In February, at the World Insurance Forum in Bermuda, Mr. Cooney said Max Re was carefully analysing what types of insurance and reinsurance were likely to be the most profitable. ?We are in the risk taking business but where do we get paid more to take risk,? he asked.

In the first quarters this year and last, reinsurance sales accounted for between 70 and 80 percent of MaxRe?s business, the balance being insurance business. Reinsurers sell coverage to insurers, and sometimes other reinsurers, helping spread risks between more than one carrier.

Max Re?s move away from a focus on investment returns four years ago came as market conditions slumped. The company never ruled out counting more on investment returns when market results improved. It seems to have benefited in the first quarter from its continued investment in alternative investments, such as hedge funds. Net investment income grew to $34 million from $23.7 million a year ago, a 43.5 percent improvement.

The jump in returns included alternative investments, which account for roughly 30 percent of Max Re?s total invested assets, seeing an improvement to a 4.4 percent rate of return. The rate of return was 1.2 percent, a year ago.

Max Re?s earnings announcement came within a day of the company saying it would restate its results for several years between 2001 and 2005. The net effect of the restatement is a $14.8 million decline in profit over the period, far better than an inital $50 million estimate.